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> Posted by Haset Solomon, Associate, the Smart Campaign, and Sonja E. Kelly, Fellow, CFI
Click for complete and full-size infographic
Earlier this year we shared a puzzle: microfinance institutions reported that they had age caps on credit products, but we couldn’t figure out what data or rationale was backing them. Leveraging the Smart Campaign’s endorser network of over 2,000 microfinance institutions, we set out to get to the bottom of this puzzle. What we found in our survey surprised us.
Consistent with our research in the Financial Inclusion 2020 (FI2020) publication Aging and Financial Inclusion: An Opportunity, 61 percent of respondents indicated that they have age caps at their microfinance institutions. Indeed, it is common-place for institutions to place age caps on their credit products. The practice is not limited to one country or region – respondents to the survey came from 45 different countries across every region. As we analyzed the survey, we figured there is either a global phenomenon of discrimination against older people or everyone has a very good reason for their actions that we have been missing.
When asked what the age cut-off is at each respondent’s institution, the responses ranged between 55-80 years, and the average age was 65. Our research earlier this year, however, found that this age cut-off is not always consistently applied within each institution. New customers may have an earlier age cut-off, whereas customers with an existing relationship with an institution may be given an additional few years to apply for a new loan.
So, why do institutions impose these age caps on credit products? We received two competing answers:
Read the rest of this entry »
> Posted by Center Staff
How has Latin America and the Caribbean’s (LAC) market at the base of the pyramid (BoP) changed during recent years? Tuesday, the Inter-American Development Bank (IDB) released a new report exploring this question. Among the findings, the research revealed that the BoP market (those living on less than $10 per day) has grown 22 percent in a decade, going from $623 billion in 2000 to $759 billion in 2010. This increase wasn’t the result of demographic changes, but of economic growth. The per capita income among the BoP in the region increased at 2 percent annually across the decade, while that of the overall population remained relatively constant. What does this mean? A lot of things, including that there is a growing opportunity for companies to offer products and services to this population segment that have long been unavailable to them.
The report presents information on the size of the BoP market, its social-economic characteristics, market segments, consumer preferences, spending patterns, and demand-related factors. The report also looks at the supply side of the BoP market and analyzes the types of business models, distribution channels, and input sources that have successfully engaged this population segment.
Here are some of the report’s main findings: Read the rest of this entry »
(click to enlarge)
> Posted by Sonja Kelly, Fellow, CFI
Since the release of our paper, Aging and Financial Inclusion: An Opportunity, I have been considering the challenge of market segmentation using the life course. This is not unexplored terrain at the Center for Financial Inclusion. Beth Rhyne articulated a life course approach during our Looking Through the Demographic Window project, which we have captured in the infographic embedded at right. I have been hearing from microfinance institutions that some efforts are underway to segment clients by their life stage, though this remains a relatively untouched area in the industry. For a great example of segmentation, however, I only had to look to the spam filter on my email.
Most of the emails that get caught in my spam filter are about body image. I receive messages advertising dieting pills, on the one quick fix to reduce belly fat (you won’t believe which celebrities use it!), and how to get toned abs within a week. This makes sense—I work out regularly, and I (try to) watch what I eat. The emails are tailored to me.
In chatting with my colleagues, I find that they also receive targeted emails. Some women in our office who are older than me receive emails for walk-in tubs. Singles get emails that point them to dating websites. Some of the younger men in our office get emails that refer to “satisfying” their girlfriends. And the spam filters of older men in our office collect emails about (ahem) performance-enhancing pills.
These are, of course, gross generalizations—the life course cannot possibly be reduced to dieting, walk-in tubs, and bedroom performance. But why is it that the email caught in my spam filter is more skilled at customer segmentation using the life course than my financial institution’s product line? Even more than being successful at segmenting a potential client base, spam marketers are successful at moving this potential client base to action, according to MailChimp. They have a simple message and a call to action. Their “click rates,” or the rate at which people click on links, are higher than average.
> Posted by Center Staff
Last week Aging and Financial Inclusion: An Opportunity was released, a new FI2020 report from CFI and HelpAge International supported by MetLife Foundation. The report examines the unmet financing needs of older adults, an area of increasing importance as global demographic shifts see the rapid expansion of this population segment. Within 25 years, the percent of the world’s population over age 60 will nearly double.
As part of the report’s launch, HelpAge International’s Head of Policy Eppu Mikkonen-Jeanneret, MetLife Foundation’s Financial Inclusion Lead Evelyn Stark, and CFI’s Managing Director Elisabeth Rhyne sat down to discuss the project and its findings. The conversation, among its topics, touched on the scale of the demographic shifts at hand, the opportunities in these changes, where we are with pension services, and action areas for policymakers, providers, and support organizations.
CFI and HelpAge’s New Research Initiative Examines the Financial Needs of Older Persons
> Posted by Eric Zuehlke, Web and Communications Director, CFI
Proportion of the Population that is Elderly (click to enlarge)
A few years ago, my 90-year-old grandfather moved from Japan, where he had lived his entire life, to live with my parents in Virginia. Although he was retired and living comfortably, the death of my grandmother left him without an adequate support system. With his healthy pension and public assistance from the Japanese government, mixed with the security of living with my parents, he is well cared for. I’d say he is financially included. But on a global scale, he’s one of the lucky ones. All his supports – close family, a pension, good health care, and insurance – are inadequate for many. And the need for appropriate services is growing.
The facts speak for themselves. Between 2010-2020, the population of older persons will almost double in middle-income countries and increase by 40 percent worldwide. Yet despite this growing population, the provision of financial services is woefully inadequate. One in four older people in low and middle-income countries do not have a pension, and most pensions are inadequate to meet individual needs. Not only are financial services lacking, we don’t even fully understand financial inclusion in older age. The mismatch between the scale of the need and the attention devoted to it is staggering.
> Posted by Sonja E. Kelly, Fellow, CFI
#506202603 / gettyimages.com
In most places around the world the subject of pensions is a sore one. In 2012, for example, in looking at arguably the crème of private employers, Fortune 100 companies, only 30 offered their U.S. new hires pension plans, down from 47 in 2008. For public sector employees in the U.S. in the same year, the pension plans of 26 states were less than 70 percent funded. In lower and middle-income countries where financial security is weaker, the situation is even worse. In India, the pension system only covers roughly 12 percent of the population.
The severity of these figures is amplified when we look at demographic trends. Between 2010 and 2020, the population of older adults will almost double in middle-income countries. Worldwide over the decade, it will increase by 40 percent. By 2050, there will be roughly 1.5 billion older adults, 315 million of whom will be in India.
Aging presents unique challenges and opportunities to the financial inclusion industry. During a session at the Microcredit Summit in Merida, Mexico a few weeks ago, five panelists met to discuss this topic. John Hatch (FINCA), Pilar Contreras (HelpAge), Caroline van Dullemen (World Granny), Reynold Walter (REDCAMIF), and myself all acknowledged the demographic reality—as populations age, if countries have not helped their societies and economies to prepare, they will face a global train wreck in the form of older people without adequate means of support and support systems that are overwhelmed. Financial inclusion can and should play a unique role in helping both individuals and whole countries mitigate risks.
> Posted by Sonja E. Kelly, Fellow, CFI
#AA000029 / gettyimages.com
We would like to invite you—yes you—to lend your voice to our Financial Inclusion 2020 research on the issue of financial inclusion and aging.
The financial inclusion community has, with a few bright exceptions, been slow to recognize how rapidly the global population is aging, which is problematic considering the unique financial needs of this older population and the extent of this population growth. The statistics are stunning – in 1950, globally, 1 in 20 was above the age of 65; by 2050, it will be 1 in 5. The growth in the population of older adults is happening not just in developed countries, but everywhere. This demographic trend presents not only significant issues for the global economy, but also significant opportunities for inclusion that will affect people of all ages.
We would love to hear your opinion. Do you have a few minutes today to lend your voice to the conversation?
> Posted by Jeffrey Riecke, Communications Associate, CFI
Corporate social responsibility or profitability? Why are more and more financial services providers expanding their focus to include banking the unbanked? After all, many of those without formal financial services don’t have incomes to support big or frequently-used products, and their circumstances often present challenges for access, risk, and other services dimensions.
Industry activity in recent years, organizational objectives aside, has demonstrated the potential for sustainable and profitable investment in financial inclusion. Advancements in product design, technology, and risk management, and trends in demographics and incomes are making it increasingly possible for commercial financial services providers, as well as stakeholders in adjacent industries like telcos and technology providers, to support inclusion.
In the following video, global leaders discuss how financial inclusion is not only good for individuals, markets, and countries, but also good business.
> Posted by Sonja E. Kelly, Fellow, CFI
The Financial Inclusion 2020 project at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”
As people age, their use of financial services changes. We explored this in detail when we published a lifecycle approach to financial services in Peter Kasprowicz and Elisabeth Rhyne’s Looking Through the Demographic Window. People of working age need to plan for the future while also providing for their families in the present. People who are elderly need to be able to draw on their savings, manage their wealth, and in many cases, draw on and use their pensions.
When we look at the world as a whole, we see little difference between bank account ownership among the working age population (defined as ages 25 to 64) and those who are older (age 65+):
Source: World Bank Global Findex Microdata, 2012
This global equality between the two age groups masks interesting variation in regions in account ownership by age. In Sub-Saharan Africa and East Asia and the Pacific, a much higher percentage of working age adults than older adults have accounts, while Latin America and the Caribbean shows little difference between those groups. Read the rest of this entry »
> Posted by Meghan Greene and Sonja E. Kelly, Manager and Fellow, CFI
The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”
What’s in a number? Part of the Center’s Financial Inclusion 2020 work is to think about how global trends affect financial inclusion demand—we’ve been doing so in our Mapping the Invisible Market work and in our exploration of the client perspective.
In this work, it can be useful to think in terms of age. In our demographic work we examined how a person’s stage in life might affect his or her demand for financial services. We also discovered that many developing countries have rapidly aging populations. But just how rapidly the populations are aging depends on the definition of old. When calculating dependency ratios (the ratio of those who are dependent to those who are in the working age population), the UN recommends the following definitions:
- “Child” is a person under the age of 15
- “Youth” is a person aged 15-24
- “Old age” is age 65 and above Read the rest of this entry »
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